Newspapers Bleed Red Ink: Death by Internet

If you're a journalist, consider quitting and becoming a SEO specialist. The search industry's filled with former journalists who've seen the light. The alternative is death by Internet.

For newspapers, 2008 is shaping up as their worst year on record, with a double-digit drop in advertising revenue raising serious questions about the survival of some papers and the solvency of their parent companies.

Overall, ad revenue fell almost 8 percent last year. This year, it's running about 12 percent below that dismal performance, and company reports issued last month suggested a 14 percent to 15 percent decline in May.

So what do Internet giants think of the newspaper industry bleeding red ink.

Google CEO Eric Schmidt

Schmidt says media companies should see Google as an ally, not an enemy. Why? Google is trying to make advertising work on the Internet.

The New York Times says, "The primary long-term threat to newspapers is the Internet's siphoning away of ad revenue, a trend that has been underway for more than a decade, but one that has picked up speed in the last year. Advertisers have vastly more choices online than on paper, so newspaper Web sites win only a fraction of the advertising that goes digital, and it pays much less than advertising in print."

Google has a financial incentive to ensure advertising can support high-quality content, Schmidt said during an onstage interview with Ken Auletta, The New Yorker's media reporter. But Schmidt said there's another dimension to Google's motivation, too, one not often figuring prominently in business affairs.

"It's a huge moral imperative to help here," Schmidt said of publishers' problems making advertising work on the Internet. "There is a sea change from one model to another. Many of the criticisms I see seem to be merely about the change, and Google happens to be the messenger. Those changes are going to occur independently."

Google denies being a publisher, but offers countless videos through YouTube.

That doesn't mean Google isn't a direct competitor to print newspapers that fight for reader attention with Google News (and other online sites). Even new Internet services such as Twitter "break news" -- the traditional function of newspapers.

People are consuming more media on the Internet, but paying less, Schmidt said. "That's bad for Google. We are critically dependent on high-quality content."

News Corp Chairman and CEO Rupert Murdoch

Murdoch, owner of The Wall Street Journal, doesn't have such a bleak outlook:

"I just love communicating with people; newspapers is a way of doing it. I don't care what platform our news appears on. Across the country today, some people share that view, and others are just frightened. All of them are going to have a hard time. Average newspapers are down 10 percent to 30 percent in total ad revenue, and that means their profit margins. They have made every economy possible in production, but not in journalism. They are going to do that. It gives a huge opportunity for the Wall Street Journal. A paper servicing the 10 percent of the most influential, most educated people in a community is a huge opportunity. I think print will be there. We'll have a big wide free site, but when you get into what we have today, with a lot of analysis and detail, people will pay for that."

"In the next 10 years, the whole world of media, communications and advertising are going to be turned upside down -- my opinion. Here are the premises I have. Number one, there will be no media consumption left in 10 years that is not delivered over an IP network. There will be no newspapers, no magazines that are delivered in paper form. Everything gets delivered in an electronic form."

What Can Newspapers Do?

The Charlotte Observer is shrinking its staff by 11 percent, or 123 jobs, including 22 job cuts in the newsroom.

I used to write freelance articles for the Charlotte Observer, so my point of view is biased. Newspapers created many of their own problems. For example, I was once told a columnist could only be a journalist with decades of experience. There was no interest in new voices or different points of view.

Last month, the Observer reduced its staff size by offering a voluntary buyout program. Thirty-two staffers accepted the offer.

It's part of an overall 1,400-job cutback by parent company The McClatchy Co. owner of the Observer and several other newspapers in the Carolinas. McClatchy cites a slow advertising market.

The paper also announced efforts to more closely align the Observer's newsroom with the News & Observer of Raleigh, also a McClatchy publication. The papers are combining capital bureaus, sports, and research departments in an effort to eliminate overlapping work. The newsrooms' feature departments also will work to develop jointly produced sections.

The News & Observer will cut 70 jobs, or about 8 percent of its workforce, from the newsroom, advertising, marketing, circulation, production, and technical support.

The Sacramento, Calif.-based company's workforce is down 13 percent between the end of 2006 and April 2008.

Newspaper publishers reported dismal classified ad sales in April, the latest period for which figures are available. For the month classifieds were down 29 percent at Media General, 28 percent at McClatchy, 23 percent at the New York Times Co., and 20 percent in the U.S. for Gannett. That's on top of similar declines during the first quarter of 2008. In all likelihood, the collapse in classified ad revenue will surpass the fall-off the newspaper industry experienced in the wake of the dot-com bust in 2001-2002.

The future seems clear to me: change professions now or face extinction.

For journalists, the future's so bright you've got to wear green eyeshades.

About the author

Kevin Heisler, formerly the executive editor of Search Engine Watch, is a search and advertising industry veteran. His former roles include VP, strategic accounts for integrated digital marketing firm 360i; director of business development for Didit Search Marketing; and search industry analyst at Jupiter Research.